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entitled 'Managing Critical Isotopes: DOE's Isotope Program Needs
Better Planning for Setting Prices and Managing Production Risks'
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United States Government Accountability Office:
GAO:
Report to Congressional Requesters:
May 2012:
Managing Critical Isotopes:
DOE's Isotope Program Needs Better Planning for Setting Prices and
Managing Production Risks:
GAO-12-591:
GAO Highlights:
Highlights of GAO-12-591, a report to congressional requesters.
Why GAO Did This Study:
DOE is the only domestic supplier for many of the over 300 different
isotopes it sells that are critical to medical, commercial, research,
and national security applications. Previous shortages of some
isotopes, such as helium-3, an isotope used to detect radiation at
seaports and border crossings, highlight the importance of managing
supplies of and demand for critical isotopes. Prior reports by GAO and
others highlighted risks and challenges faced by the Isotope Program,
such as assessing demand for certain isotopes. GAO was asked to
determine (1) which isotopes are produced, sold, or distributed either
by the Isotope Program or NNSA and how the two agencies make isotopes
available for commercial and research applications; (2) what steps the
Isotope Program takes to provide isotopes for commercial and research
applications; and (3) the extent to which DOE is assessing and
mitigating risks facing the Isotope Program. GAO reviewed DOE and NNSA
documents, visited Oak Ridge National Laboratory, and interviewed
cognizant agency officials.
What GAO Found:
The Department of Energy’s (DOE) Isotope Development and Production
for Research and Applications program (Isotope Program) provides over
300 different isotopes for commercial and research applications. The
Isotope Program is responsible for 243 stable isotopes that are no
longer produced in the United States but are sold from the program’s
existing inventory and for 55 radioactive isotopes, called
radioisotopes, that the program is able to produce at DOE facilities.
An additional 10 isotopes sold by the Isotope Program are provided by
the National Nuclear Security Administration (NNSA), a separate agency
within DOE, as by-products of its nuclear weapons program.
The Isotope Program may be forgoing revenue that could further its
mission because of the manner in which it sets prices for commercial
isotopes. The Isotope Program determines demand, coordinates
production, and sets prices for commercial isotopes. To set prices for
radioisotopes, the program considers the full cost of production,
including direct costs (e.g., labor costs) and indirect costs (e.g.,
infrastructure costs). For research applications, isotope prices are
set to recover direct costs to reduce prices and encourage research.
For commercial applications, prices are set at full cost recovery—-of
both direct and indirect costs—-or at an isotope’s market price when a
market price higher than full cost recovery already exists. The
program, however, has not fully assessed the pricing of most of these
isotopes, as required by its 1990 pricing policy. This policy provides
latitude for setting prices and states that prices should be assessed
annually. Factors that may be considered when establishing prices
include the value of an isotope to the customer, demand, and the
number of suppliers. The program, however, has not assessed the value
of isotopes to customers or defined what factors it will consider when
it sets prices for commercial isotopes, including defining under what
circumstances it will set prices at or above full cost recovery. As a
result, the program does not know if its full-cost-recovery prices are
set at appropriate levels so as not to distort the market, and it may
be forgoing revenue that could further support its mission.
The Isotope Program has begun taking some actions to identify and
manage risks to achieving its mission of producing isotopes, but
because it has not established clear, consistent program objectives,
the program’s risk assessment efforts are not comprehensive. Actions
the Isotope Program is taking include, among other things, identifying
high-priority isotopes and using its revolving fund to mitigate risks
from unforeseen events. For example, the Isotope Program has
identified five lists of high-priority isotopes—-those at risk of
supply problems because they are already in short supply or are
important to users. Isotope Program officials reported using these
lists to set program priorities. The Isotope Program is taking these
actions, however, without first establishing clear, consistent
objectives. The federal standards for internal control state that a
precondition to risk assessment is the establishment of clear
objectives. Without clearly defined objectives, the program cannot be
assured that it is assessing risks from all sources or that its
efforts are focusing on the most significant risks to achieving its
mission. Furthermore, without consolidating the multiple high-priority
lists, Isotope Program managers may not be directing limited resources
to the most important isotopes.
What GAO Recommends:
GAO recommends, among other actions, that DOE’s Isotope Program define
what factors it considers when setting isotope prices, create clear
objectives as a basis for risk assessment, and consolidate the lists
of high-priority isotopes. DOE stated that it will address GAO’s
recommendations through the Isotope Program’s current efforts to
update its pricing policy and develop a strategic plan.
View [hyperlink, http://www.gao.gov/products/GAO-12-591]. For more
information, contact Gene Aloise at (202) 512-3841 or aloisee@gao.gov.
[End of section]
Contents:
Letter:
Scope and Methodology:
Background:
DOE's Isotope Program and NNSA Together Produce or Make Available over
300 Isotopes for Research and Commercial Applications:
In Providing Commercial Isotopes, DOE's Isotope Program May Be
Forgoing Revenue That Could Further Support Its Mission:
DOE's Isotope Program Has Taken Some Actions to Identify and Manage
Risks, but Its Efforts Are Not Comprehensive:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Isotopes Available from DOE's Isotope Program:
Appendix II: Comments from the Department of Energy:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Revenues and Obligations of DOE's Isotope Program, Fiscal
Years 2009 through 2011:
Table 2: The Eight Top-Selling Isotopes of DOE's Isotope Program in
Fiscal Year 2011:
Table 3: Isotopes Available for Sale by DOE's Isotope Program:
Table 4: Stable Isotopes Sold by DOE's Isotope Program with a Supply
of Less Than 10 Years:
Abbreviations:
DOE: Department of Energy:
NNSA: National Nuclear Security Administration:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
May 23, 2012:
The Honorable Brad Miller:
Ranking Member:
Subcommittee on Energy and Environment:
Committee on Science, Space, and Technology:
House of Representatives:
The Honorable Paul D. Tonko:
Ranking Member:
Subcommittee on Investigations and Oversight:
Committee on Science, Space, and Technology:
House of Representatives:
The Department of Energy's (DOE) Isotope Development and Production
for Research and Applications program (Isotope Program) is the only
domestic supplier for many of the more than 300 different isotopes
that it sells, many of which are critical to medical, commercial,
research, and national security applications.[Footnote 1] For example,
the program produces and sells strontium-82, an isotope used to
generate rubidium-82, which is used in the diagnosis of heart disease.
Overall, approximately 20 million medical procedures are performed
each year in the United States using isotopes. Other applications for
isotopes include oil and gas exploration, physics research, and
radiation detection monitors that screen cargo and vehicles at ports
and border crossings. Additionally, a January 2012 federal workshop on
isotopes was held by the Isotope Program and the National Nuclear
Security Administration (NNSA), a separately organized agency within
DOE,[Footnote 2] to discuss isotope supply and demand. At this
workshop, more than 20 federal government entities, including the
Department of Defense's Defense Threat Reduction Agency, Department of
Homeland Security's Domestic Nuclear Detection Office, National
Aeronautics and Space Administration, National Institutes of Health,
and Federal Bureau of Investigation identified more than 100 different
isotopes that are key to achieving their missions, according to
program officials.
Previous shortages of some isotopes, such as helium-3, highlight the
importance of managing supplies of and demand for critical isotopes.
For example, in May 2011 we reported on a shortage of helium-3--an
isotope used in radiation detection monitors deployed at ports and
border crossings to detect nuclear material and prevent terrorists
from smuggling such material into the United States.[Footnote 3] DOE
is the only domestic supplier of helium-3, producing about 8,000
liters per year. As demand for helium-3 increased beginning in 2001,
sales quickly outpaced production levels, resulting in a critical
shortage in 2008. As a result, the federal government was forced to
quickly begin developing alternatives to helium-3 in order to continue
deploying radiation detection monitors.[Footnote 4]
In fiscal year 2009, DOE transferred the Isotope Program from its
Office of Nuclear Energy to its Office of Science and revised the
program's mission to three purposes: (1) produce or distribute
isotopes in short supply, their associated by-products and surplus
materials, and deliver isotope-related services; (2) maintain the
infrastructure required to produce and supply isotopes and related
services; and (3) investigate and develop new or improved isotope
production and processing techniques that can make new isotopes
available for research and other applications. To meet this three-
pronged mission, the Isotope Program operates from an annual budget
consisting of yearly appropriations[Footnote 5] and revenues from
isotope sales. In fiscal year 2011, appropriations totaled almost $20
million, and revenues from sales of isotopes alone totaled almost $27
million, according to data provided by agency officials.
In addition to DOE's Isotope Program, NNSA generates or provides some
additional isotopes as by-products of the weapons program and research
activities. Through its Office of Nuclear Materials Integration, NNSA
makes these isotopes available to other federal entities, including
DOE's Isotope Program, which then coordinates their sale and
distribution to researchers and commercial entities.
Since 2008, the Isotope Program has been addressing programmatic risks
and challenges as identified by external stakeholders as part of a
series of program reviews. The risks and challenges the reviews
identified included concerns over supply limitations for some
isotopes, the need for long-term infrastructure investments to
maintain the capacity for isotope production, and difficulties with
accurately forecasting isotope demand. Specifically, in August 2008,
DOE organized a workshop bringing together a wide range of
stakeholders to discuss the nation's current and future isotope needs
and to consider options for improving the availability of needed
isotopes. This workshop identified 30 key isotopes that were in short
supply at that time, including 12 whose supplies had been exhausted or
were likely to run out within the following 3 years. Also in 2008, DOE
requested that the Nuclear Science Advisory Committee form an isotope
subcommittee to advise the program on specific isotope risks.[Footnote
6] The subcommittee produced two reports in response: one identifying
and setting priorities for compelling research opportunities using
isotopes and another report presenting opportunities and priorities
for ensuring a robust national isotope program. These reports
highlighted short-term and long-term risks and challenges facing the
Isotope Program, such as the program's reliance on DOE laboratories to
produce certain isotopes. Specifically, the report expressed concern
that the Isotope Program relies on the linear particle accelerators
[Footnote 7] at Brookhaven National Laboratory and Los Alamos National
Laboratory for isotope production, even though isotope production is
not the primary mission of these laboratories.
In light of the importance of the isotopes sold by the Isotope Program
and the various challenges it faces, you asked us to review the
program. Specifically, our objectives were to determine (1) which
isotopes are produced, sold, or distributed either by the Isotope
Program or NNSA and how the two entities make isotopes available for
commercial and research applications; (2) what steps the Isotope
Program takes to provide isotopes for commercial and research
applications; and (3) the extent to which DOE is assessing and
mitigating risks facing the Isotope Program.
Scope and Methodology:
To identify which isotopes are produced, sold, or distributed either
by the Isotope Program or NNSA and how the two agencies make isotopes
available for commercial and research applications, we reviewed the
DOE Isotope Program's information on available isotopes, isotope sales
data, and information on NNSA's isotopes. We also visited Oak Ridge
National Laboratory in Tennessee, where the Isotope Program's business
office and the program's inventory of stable isotopes are located, to
view production facilities and interview officials about isotope
production and sales. We interviewed officials at the national
laboratories that produce isotopes for the Isotope Program: Brookhaven
National Laboratory in New York, Idaho National Laboratory in Idaho,
Los Alamos National Laboratory in New Mexico, Oak Ridge National
Laboratory in Tennessee, and Pacific Northwest National Laboratory in
Washington State. We also interviewed headquarters officials with the
Isotope Program and NNSA about isotope production and how the two
entities work together. To determine what steps the Isotope Program
takes to provide isotopes for commercial and research applications, we
reviewed the Isotope Program's production schedules, pricing policy,
and documents related to how the program gathers information on
customers' needs. We also interviewed representatives from commercial
companies and researchers who purchase isotopes from the Isotope
Program. We interviewed officials from the National Isotope
Development Center; the Isotope Program; and Brookhaven, Los Alamos,
and Oak Ridge National Laboratories because officials at these
locations are involved in producing and selling isotopes to customers.
To determine the extent to which DOE is assessing risks facing the
Isotope Program, we reviewed reports from the Nuclear Science Advisory
Committee's isotope subcommittee and the report from the isotope
workshop DOE held in 2008. We also reviewed the strategic plans, risk
assessment plans, and related documents from Brookhaven, Los Alamos,
and Oak Ridge National Laboratories because the Isotope Program is the
steward of isotope production at these sites. We reviewed and compared
lists of high-priority isotopes that were prepared by the Isotope
Program, the Nuclear Science Advisory Committee's isotope
subcommittee, the National Institutes of Health, and stakeholders at
the 2008 isotope workshop. We also interviewed officials from the
Isotope Program and Brookhaven, Los Alamos, and Oak Ridge National
Laboratories to learn about risk assessment planning at each site and
for the Isotope Program. In addition, we compared actions the Isotope
Program is taking to assess risks with federal standards for internal
control.[Footnote 8]
We conducted this performance audit from June 2011 to May 2012, in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
Isotope production and distribution have been part of DOE's mission
since at least 1954, when the Atomic Energy Act of 1954 specified the
role of the U.S. government in isotope distribution.[Footnote 9] DOE's
Isotope Program fills this role by providing isotopes to support the
national and international need for a reliable supply for use in
medicine, industry, and research. The Isotope Program provides both
radioactive isotopes, called radioisotopes, and stable isotopes, which
are not radioactive.[Footnote 10] In addition, the Isotope Program
provides a range of isotope-related services to customers worldwide.
For example, the program may lease some stable isotopes and also
provides irradiation and isotope-processing services for research and
commercial applications.
DOE transferred the Isotope Program from the department's Office of
Nuclear Energy to its Office of Science in 2009, at which time DOE
restructured the program. The program currently consists of four DOE
headquarters employees who oversee operations and set policy, plus the
National Isotope Development Center, which is a virtual organization
consisting of DOE contract employees located at Los Alamos National
Laboratory and Oak Ridge National Laboratory. National Isotope
Development Center employees carry out day-to-day operations of the
Isotope Program, which include interacting with the isotope user
community though a variety of outreach activities, monitoring short-
term and long-term isotope demand, coordinating isotope production
across DOE's isotope production facilities, and distributing isotopes.
The National Isotope Development Center includes DOE contract
employees at the Isotope Business Office, located at Oak Ridge
National Laboratory, who manage business operations involved in the
production, sale, and distribution of isotopes. In addition, officials
from the National Isotope Development Center and DOE headquarters
coordinate with many federal programs, including the National
Institutes of Health, to identify current and future isotope needs.
The Isotope Program produces most of its radioisotopes at three DOE
production sites: the linear particle accelerators at Brookhaven
National Laboratory in New York and Los Alamos National Laboratory in
New Mexico, and the nuclear reactor at Oak Ridge National Laboratory
in Tennessee. The program also produces a small number of
radioisotopes at the Pacific Northwest National Laboratory in
Washington State and at Idaho National Laboratory. The DOE facilities
associated with the Isotope Program are recognized as uniquely capable
of producing radioisotopes. Although the Isotope Program uses these
DOE sites to produce radioisotopes, the program does not manage all
the sites' operations. Rather, the Isotope Program shares the use of
these sites with other missions, which consist of a diverse
combination of DOE activities related to nuclear science, materials
research, or defense. The production sites are therefore not always
available to the Isotope Program, and at times the program may not
control the timing and duration of isotope production.
The Isotope Program relies on appropriations and revenues from isotope
sales for funding its operations. Both yearly appropriations and sales
revenues are deposited into a revolving fund[Footnote 11] from which
the program draws funds to operate its facilities, produce isotopes,
pay employees' salaries, and fund research, among other activities.
Funds remain available to the program in the revolving fund, which
allows the program to carry over balances from year to year, giving
the program budgeting flexibility. Table 1 shows the Isotope Program's
revolving fund balances, annual appropriations, annual sales revenues,
and obligations to operate the program for fiscal years 2009 through
2011. The Isotope Program's annual spending on research and
development is generally aimed at developing new or more efficient
isotope production techniques.
Table 1: Revenues and Obligations of DOE's Isotope Program, Fiscal
Years 2009 through 2011:
Revenues:
Carryover from previous fiscal year:
Fiscal year 2009: $14,341,000;
Fiscal year 2010: $24,235,000;
Fiscal year 2011: $16,844,000.
Sales revenues and other resources[A]:
Fiscal year 2009: $25,373,000;
Fiscal year 2010: $18,620,000;
Fiscal year 2011: $28,837,000.
Appropriations:
Fiscal year 2009: $24,760,000;
Fiscal year 2010: $19,116,000;
Fiscal year 2011: $19,670,000.
American Recovery and Reinvestment Act funds[B]:
Fiscal year 2009: $14,617,000;
Fiscal year 2010: $0.00;
Fiscal year 2011: $0.00.
Total funding:
Fiscal year 2009: $79,092,000;
Fiscal year 2010: $61,971,000;
Fiscal year 2011: $65,351,000.
Obligations:
Research and development:
Fiscal year 2009: $5,424,000;
Fiscal year 2010: $6,151,000;
Fiscal year 2011: $1,644,000.
Operations:
Fiscal year 2009: $49,433,000;
Fiscal year 2010: $38,976,000;
Fiscal year 2011: $45,696,000.
Total obligations:
Fiscal year 2009: $54,857,000;
Fiscal year 2010: $45,127,000;
Fiscal year 2011: $47,360,000.
Carryover to next fiscal year:
Fiscal year 2009: $24,235,000;
Fiscal year 2010: $16,844,000;
Fiscal year 2011: $17,991,000.
Source: DOE.
Note: Numbers may not sum because of rounding.
[A] Sales revenues and other resources include revenues received for
isotope sales and isotope-related services, as well as funds received
from federal and other entities.
[B] The Isotope Program received funds from the American Recovery and
Reinvestment Act in fiscal year 2009.
[End of table]
The Isotope Program sold isotopes or provided isotope-related services
to more than 100 customers in fiscal year 2011, both in the United
States and internationally, with 6 of those customers accounting for
more than 80 percent of all sales revenue in fiscal year 2011. More
than 95 percent of the Isotope Program's annual revenue came from the
sale of eight different isotopes in fiscal year 2011; these eight
isotopes generated almost $26 million in revenue (see table 2).
Table 2: The Eight Top-Selling Isotopes of DOE's Isotope Program in
Fiscal Year 2011:
Isotope: Strontium-82;
2011 revenue: $11,560,000.
Isotope: Californium-252;
2011 revenue: $7,657,000[A].
Isotope: Helium-3;
2011 revenue: $3,255,000.
Isotope: Germanium-68;
2011 revenue: $1,910,000.
Isotope: Nickel-63;
2011 revenue: $576,000.
Isotope: Strontium-90;
2011 revenue: $297,000.
Isotope: Actinium-225;
2011 revenue: $263,000.
Isotope: Lithium-6;
2011 revenue: $223,000.
Isotope: Total;
2011 revenue: $25,741,000.
Source: DOE.
[A] This amount includes $2 million that was paid in fiscal year 2009
by customers as advance payments for future production costs.
[End of table]
DOE's Isotope Program and NNSA Together Produce or Make Available over
300 Isotopes for Research and Commercial Applications:
DOE's Isotope Program produces or makes available for sale and
distribution over 300 different isotopes for research and commercial
applications. NNSA generates or provides additional isotopes that are
transferred to other federal agencies or sold by the Isotope Program
(see appendix I). The program may produce or make available to
customers more than 300 different isotopes, but fewer than that number
are sold in a given year. In fiscal year 2011, for example, the
program sold less than 170 distinct isotopes. The isotopes sold by the
Isotope Program can be categorized as (1) radioisotopes currently
produced by the Isotope Program at DOE production sites;[Footnote 12]
(2) stable isotopes from the Isotope Program's inventory, which are no
longer produced in the United States; and (3) isotopes generated or
provided by NNSA as by-products of its nuclear weapons program (see
table 3). [Footnote 13]
Table 3: Isotopes Available for Sale by DOE's Isotope Program:
Category: Radioisotopes produced by the Isotope Program;
Number available: 55.
Category: Stable isotopes in the Isotope Program's inventory;
Number available: 243.
Category: Radioisotopes generated or provided by NNSA;
Number available: 10.
Source: DOE.
[End of table]
The Isotope Program is responsible for the production and sale of 55
radioisotopes produced at five DOE laboratories--Brookhaven, Los
Alamos, Oak Ridge, Pacific Northwest, and Idaho National Laboratories.
In any given year, the Isotope Program does not produce all 55
radioisotopes; rather, it produces and sells those for which customer
demand exists and is unmet by supply from commercial sources. At
times, the Isotope Program may choose to begin or stop producing a
given isotope depending on whether commercial entities are meeting
demand, whether an isotope's market price is so high that it inhibits
research, or whether DOE has the facilities necessary to produce the
isotope, among other considerations. For example, in 2009 the Isotope
Program reestablished production of californium-252, which is used in
a variety of applications, including oil exploration and medical
applications, because of customer demand. Californium-252 was
previously produced by the Isotope Program in partnership with NNSA
and sold through the Isotope Program. When NNSA no longer needed
californium-252 for its mission, it stopped supporting its production
in 2007, according to an Isotope Program official. The Isotope Program
worked with a coalition of commercial customers to continue producing
californium-252 to meet the needs of the coalition and researchers.
Isotope Program officials indicated, however, that a change like this
in the program's production portfolio does not happen often.
In addition to the radioisotopes it produces, the Isotope Program also
maintains an inventory of 243 stable isotopes that it sells to
customers. These stable isotopes were produced by DOE until the late
1990s at DOE facilities that are no longer in use, and since these
isotopes are stable, they can remain in storage almost indefinitely.
Because stable isotopes are no longer produced, supplies of some of
them have been exhausted, and supplies of others are dwindling.
Specifically, according to current Isotope Program data, nine stable
isotopes that were in the program's inventory are no longer available,
and six have less than 10 years' supply at current rates of use (see
table 4).
Table 4: Stable Isotopes Sold by DOE's Isotope Program with a Supply
of Less Than 10 Years:
Isotope: Gadolinium-157;
Supply: 0.5 years.
Isotope: Nickel-62;
Supply: 4.5 years.
Isotope: Neodymium-150;
Supply: 4.8 years.
Isotope: Gallium-69;
Supply: 5.9 years.
Isotope: Tungsten-183;
Supply: 7.6 years.
Isotope: Tungsten-182;
Supply: 9.9 years.
Source: DOE.
[End of table]
According to program officials, the Isotope Program occasionally
purchases quantities of some stable isotopes from foreign sources,
such as Russia, in an effort to maintain the program's supply. Isotope
Program officials explained that the program buys stable isotopes from
foreign sources and then resells them to domestic customers because
the Isotope Program can take steps to ensure isotope quality and offer
other services that foreign suppliers are unwilling to provide, such
as leasing some stable isotopes for research or other applications.
Given dwindling supplies in DOE's inventory and increasing reliance on
foreign sources, whose supplies for some isotopes are also dwindling,
the Nuclear Science Advisory Committee recommended in 2009 that the
Isotope Program reestablish capability to produce stable isotopes in
the United States. The Isotope Program is funding several projects in
response to this recommendation, including the development of stable
isotope production at Oak Ridge National Laboratory, in part, using
funds it received in fiscal year 2009 from the American Recovery and
Reinvestment Act. Isotope Program officials stated that the project is
expected to be completed in 2014.
The Isotope Program sells an additional 10 isotopes that are provided
by NNSA. The program does not control the supply of these isotopes but
coordinates with NNSA to sell and distribute them. Isotope Program
officials coordinate with NNSA's Office of Nuclear Materials
Integration, which was created in 2008 to work across DOE to, among
other things, make NNSA's isotopes and other materials available to
government entities. For example, NNSA has a stockpile of lithium-6,
some of which it provides to the Isotope Program to sell; lithium-6 is
used in research and security equipment to detect neutrons given off
by other nuclear materials. The Isotope Program also coordinates with
NNSA to produce isotopes that the Isotope Program does not have the
capability to produce, such as americium-241, which is used in smoke
detectors and medical diagnostic devices.
In Providing Commercial Isotopes, DOE's Isotope Program May Be
Forgoing Revenue That Could Further Support Its Mission:
To provide isotopes for commercial and research applications, the
Isotope Program takes steps to determine the demand for isotopes,
coordinate production across production sites, and set prices for
isotopes, but the program is not using thorough assessments to
establish prices for commercial isotopes. The Isotope Program has
flexibility to set prices at market levels for isotopes sold for
commercial applications but instead, for most isotopes where the
program is the only domestic supplier, sets prices at the level
necessary to recover its cost to produce them. In setting prices for
commercial isotopes, however, the Isotope Program is not assessing the
value of the isotope to the customer or prices of alternatives, as
permitted under its pricing policy. As a result, the Isotope Program
may be forgoing revenue that could be used to further its mission and
address unmet needs.
To Ensure the Availability of Isotopes, DOE's Isotope Program
Determines Demand, Coordinates Production, and Sets Prices:
To ensure the availability of isotopes for research and commercial
applications, the Isotope Program annually determines demand,
coordinates production across its production sites, and sets prices
for selling isotopes. To determine annual demand, Isotope Program
officials said they start with a general sense of demand based on
historical sales data and frequent interaction with customers, through
which they learn about changes in isotope needs. According to program
officials, the Isotope Program asks customers to provide information
on expected demand for the next year and as far as 5 years into the
future, although some customers said such estimates are difficult to
make. The Isotope Program also takes customers' orders for isotopes
throughout the year via e-mail, telephone, or the program's website.
These orders, for radioisotopes and stable isotopes, are received by
the Isotope Program's business office. To determine annual demand for
strontium-82, for example, Isotope Program officials ask customers how
much strontium-82 they need for the coming year, and each customer
commits to a certain amount for that year. These customers then
provide updates throughout the year to clarify actual strontium-82
quantities and delivery dates.
Orders for stable isotopes are received and processed throughout the
year by the Isotope Program, but producing radioisotopes to meet
demand requires considerable planning, according to program officials.
When the Isotope Program receives an order for a stable isotope, such
as calcium-48, it can be filled from the existing inventory of stable
isotopes. In contrast, orders for radioisotopes are taken throughout
the year and used to plan production during the Isotope Program's
annual production planning meeting. The outcome of the meeting is a
production schedule for the production sites, which identifies
radioisotopes needed for the coming year. The production schedule
outlines the projected dates when each isotope will be produced and
which site will produce it, but the exact schedule depends on a
variety of factors. Specifically, because the Isotope Program
generally does not control the operation of reactors or accelerators,
it uses the facilities at the same time as other DOE programs, thus
limiting the Isotope Program's capability to produce isotopes,
according to program officials. For instance, according to program
officials, the accelerator at Los Alamos National Laboratory typically
operates from July through December, and the accelerator at Brookhaven
National Laboratory typically operates from January through June. In
addition, because many radioisotopes decay rapidly after production,
they need to be delivered in a timely manner, and officials must
consider customers' desired delivery times when determining the
production schedule. For instance, strontium-82 has a half-life
[Footnote 14] of about 26 days and, according to one customer, must
arrive predictably to be used for its intended purpose. Other isotopes
have even shorter life spans and need to be delivered on a precise day
before they decay too much to be useful. An Isotope Program official
told us that the production schedule is adjusted throughout the year
as customers' demands change, as new isotopes are ordered, as
facilities experience unanticipated shutdowns, or for other reasons.
During our discussions with several Isotope Program customers, we
found that they were generally satisfied with the timeliness of
isotope delivery.
To set prices for radioisotopes, program officials annually request
detailed production cost data, including both direct and indirect
costs, from the individual DOE and NNSA production sites that provided
the isotope. According to program officials, direct costs include
labor costs and costs for chemical processing, among others; indirect
costs include facility maintenance costs and other infrastructure
costs. These officials said that the Isotope Program uses cost data
from the production sites to determine the sales price for each
isotope and prices isotopes differently depending on whether the
intended use is for research or commercial applications. For research
applications, isotope prices are set to recover only direct costs. In
addition, according to program officials, research isotopes are priced
by unit, instead of batch, so researchers can buy small quantities of
isotopes and not have to pay for production of an entire batch.
[Footnote 15] Thus, prices for research isotopes are subsidized by the
Isotope Program, with indirect costs covered by the program's yearly
appropriation. Program officials told us that the intent of this
subsidy is to promote independent research on uses of isotopes by
making them more affordable to the research community. Overall, the
result is that some research isotopes are priced significantly lower--
from about 9 percent to 75 percent less, in some cases--than the same
isotope used for commercial applications.
For isotopes used in commercial applications, prices are generally set
to recover, at a minimum, the full cost of isotope production,
including both direct costs and indirect costs. For orders of large
quantities of commercial isotopes, the per-unit cost of production is
lower, so the Isotope Program can provide volume discounts. In
addition, according to program officials, the Isotope Program adds a
nominal fee to isotopes sold commercially, which amounts to
approximately 10 percent in additional costs for commercial isotopes--
6 percent for administrative costs to process orders for isotopes and
4 percent as a contingency charge to cover unanticipated events. A
recent unanticipated event, for example, occurred in fiscal year 2011.
According to a program official, orders for strontium-82, which had
accounted for more than a third of the program's sales revenue in
2010, decreased significantly and unexpectedly as the result of a
recall of the cardiac imaging device that was the main application for
strontium-82. According to program officials, the Isotope Program
sales revenue declined by over $5 million from July 2011 through
January 2012 as a result, and program officials said they had to draw
from the revolving fund to maintain operations.
For stable isotopes that are sold from its existing inventory, Isotope
Program officials told us that prices are based on historical
production costs adjusted annually for inflation, rather than on
current replacement costs; the prices are the same regardless of
whether they are used for research or commercial applications.
Officials told us that they do not base the prices of stable isotopes
on current replacement costs because DOE does not have the capability
to produce these stable isotopes. Isotope Program officials told us
that market studies were in the early stages of being carried out in
preparation for reestablishing the capability to produce stable
isotopes in 2014; these studies are intended to help the program
determine which stable isotopes to produce and in what quantities.
In Setting Prices for Most Commercial Isotopes, DOE's Isotope Program
May Be Forgoing Revenue That Could Further Support Its Mission:
The Isotope Program generally charges full cost recovery for
commercial isotopes, but the program has not fully assessed the
pricing of most of the commercial isotopes it sells, as required by
its current policy, such as assessing the value of the isotopes to the
customer or prices of similar isotopes. As a result, the program may
be discouraging others from producing isotopes and, at the same time,
forgoing sales revenue that could further support its mission to
deliver needed isotopes, maintain isotope production infrastructure,
and support research, in addition to addressing unmet needs. The
Atomic Energy Act of 1954 states that the federal government should be
reasonably compensated for isotopes it sells and that isotope prices
should not discourage commercial isotope producers from entering the
market. Aside from these constraints, the Isotope Program has broad
authority in setting isotope prices. To this end, the Isotope Program
established a pricing policy in 1990 that provides latitude for
establishing prices at full cost recovery or at market prices that are
higher or lower than full cost recovery, but also states that when a
market price already exists that is higher than full cost recovery,
the market price should be used. The policy also states that prices
should be assessed annually and that additional factors may be
considered when establishing prices, including the number of
suppliers, demand, competitors' prices, and the value of the isotope
to the customer. This policy appears to be consistent with guidance
from the Office of Management and Budget on the sale of government
goods and services, which suggests that sales should be self-
sustaining and based on market prices.[Footnote 16] In cases where no
market currently exists, such as many of the commercial isotopes
produced and sold by the Isotope Program, the Office of Management and
Budget's guidance states that prices can be set by taking into account
the prevailing prices for goods that are the same as or substantially
similar to those provided by the government and then adjusting the
supply made available, prices of the goods, or both so that there will
be neither a shortage nor a surplus.
In practice, according to program officials, the Isotope Program
generally sets the prices for commercial isotopes at full cost
recovery--the lowest price possible for the program to recover its
costs for providing an isotope. According to Isotope Program
officials, prices for commercial isotopes are set above full cost
recovery only when a higher price for the isotope already exists in
the commercial market and pricing the isotope at full cost recovery
would be low enough to distort the existing market.[Footnote 17] If
isotope prices are artificially low, the Isotope Program's price may,
in turn, discourage private entities from entering the isotope market,
discourage commercial entities or researchers from exploring
alternatives to using some isotopes, or encourage overconsumption.
Isotope Program officials offered two reasons why the program charges
no more than full cost recovery for most of the commercial isotopes it
sells. First, officials told us they believe many customers are
sensitive to prices and already consider prices for isotopes to be too
high. Isotope Program officials said that some potential customers are
already unwilling or unable to pay current prices for many isotopes
and that some existing customers have suggested that any price
increases would make isotopes unaffordable and force them to seek
other isotope sources. Second, Isotope Program officials stated that
the program's role is not to maximize revenue from isotope sales but
to make isotopes widely available. Isotope Program officials told us
that, consistent with the program's mission and the Atomic Energy Act,
the Isotope Program strives to supply isotopes at reasonable prices to
encourage their use.
For most of the isotopes it produces and sells, however, program
officials told us that in instances where the Isotope Program is the
only domestic supplier, the program has not formally determined the
value of isotopes to commercial customers or prices of alternatives.
Program officials told us that they gain a sense of customers' value
for isotopes through various interactions with these customers,
although they did not provide a formal analysis as described in the
pricing policy. According to documents provided by the Isotope
Program, the program has also collected limited market information for
a small number of isotopes, but these studies are outdated or do not
consider pricing. For example, a market study provided by the Isotope
Program that was conducted in 2002 projects the future demand and
potential revenues for 25 different radioisotopes used in medicine
over the next 5 to 10 years, but that study is now outdated.
Additionally, according to one program official, the market study to
be conducted for the Isotope Program's isotopes beginning in 2012 is
to provide information on which isotopes are in greatest demand so
officials will know which stable isotopes to produce, although the
study will not address isotope prices.
Without formally assessing the value of isotopes to commercial
customers or the prices of alternatives for isotopes where the Isotope
Program is the only domestic supplier, the Isotope Program does not
know if its full cost recovery prices for isotopes are in fact
discouraging others from producing isotopes, discouraging commercial
entities and researchers from developing alternatives, and/or
encouraging overconsumption. If assessments of customers' value for
isotopes and the prices of potential alternatives show that prices can
be increased above full cost recovery for some commercial isotopes,
the additional revenue could be used to further the Isotope Program's
mission and address unmet needs. For example, revenues could be used
to fund research for the development of new or more efficient
production capabilities for additional isotopes. Also, the Nuclear
Science Advisory Committee recommended in its report on opportunities
and priorities for ensuring a robust national isotope program that the
Isotope Program invest in a facility dedicated to producing
radioisotopes. Such a facility, according to the advisory committee,
is the most cost-effective option to position the Isotope Program to
ensure continuous access to many of the needed radioactive isotopes.
Program officials told us they were developing a new pricing policy,
but because the policy is in draft form and subject to change, we were
unable to determine, among other things, whether the new policy would
provide direction on how commercial isotope prices are to reflect the
value of the isotope to the customer, the prices of alternatives, or
both.
DOE's Isotope Program Has Taken Some Actions to Identify and Manage
Risks, but Its Efforts Are Not Comprehensive:
The Isotope Program has begun taking some actions to identify and
mitigate risks to achieving its mission of producing isotopes, such as
the risk of relying on sales of a small number of commercial isotopes
for a large percentage of its revenues, but without first establishing
clear, consistent program objectives, the program's risk assessment
efforts are not comprehensive.
DOE's Isotope Program is Taking Varied Actions To Identify and
Mitigate Program Risks:
The Isotope Program is taking some actions to assess risks to
achieving its mission, including identifying high-priority isotopes
and using its revolving fund to mitigate risks from unforeseen events.
Risk assessment first involves, according to federal standards for
internal control,[Footnote 18] identifying and analyzing risks
associated with achieving a program's objectives and then determining
how to manage such risks. Our analysis shows that the Isotope Program
currently assesses risks through several methods. First, Isotope
Program officials, National Isotope Development Center staff, and
production site managers identify risks to providing isotopes by
monitoring long-term changes in demand within the isotope community
that could affect isotope supply. Unlike determining demand for annual
production planning, these monitoring activities focus on changes that
could influence isotope supply and demand in the longer term, such as
new products that could eventually increase demand for a specific
isotope, according to Isotope Program documents. According to program
officials, long-term monitoring activities help them stay abreast of
changes in the isotope community that may warrant adjustments to the
program's product portfolio. In addition, program officials told us
that these activities play a role in long-range program planning, as
well as informing decisions regarding research and development. Some
monitoring activities are performed on a continuous basis, such as
discussing new developments in isotope uses and production capacity
with foreign isotope suppliers, while others occur once or a few times
a year, such as attending industry conferences to collect information
about new commercial products that use isotopes. To manage risks
created by changes in demand, according to Isotope Program officials,
the program gathers additional information on the issue and may
convene workgroups that bring together isotope community stakeholders
to discuss trends for one or several isotopes. For example, the
program organized a working group in 2008 with representatives from
the National Institutes of Health to explore supply and demand for
medical research isotopes. It also convened a workshop of federal
stakeholders in January 2012 to discuss isotope priorities, supply,
and demand among federal entities.
The Isotope Program also assesses risks to the program by identifying
high-priority isotopes--those at risk of supply problems, either
because the isotopes are already in short supply or are important to
users. Five lists of high-priority isotopes have been created by
isotope stakeholders, and Isotope Program officials said that they use
the lists to set program priorities. The following describes each of
the lists and the entity that created them:
* The 2008 workshop of isotope community stakeholders created an
unranked list of more than 47 isotopes considered to be in short
supply or unavailable from DOE for research and applications.
* In 2009, the National Institutes of Health isotope working group
developed a list of important medical research isotopes that are not
commercially available; the list was updated and ranked in order of
priority in January 2012.
* In 2009, the Nuclear Science Advisory Committee's isotope
subcommittee produced a list of isotopes important for medical and
scientific research purposes and prioritized them according to the
importance of the research opportunities.
* In 2011, the National Isotope Development Center listed stable
isotopes in priority order according to the importance of the isotopes
in research and commercial applications.
* In 2011, the National Isotope Development Center listed specific
isotopes called nuclear materials and heavy elements and prioritized
them on the basis of importance of the isotopes in research and
commercial applications.
Program officials told us they use the high-priority lists to
establish program priorities, such as determining what research and
development initiatives to undertake. For example, according to
program officials, for some of the listed isotopes, the program has
reached out to universities to research new production methods. In
addition, the Nuclear Science Advisory Committee's isotope
subcommittee's list serves as a criterion for awarding research and
development grants; research projects for isotopes on the list receive
higher priority for funding than projects for isotopes not on this
list. Four of the lists rank the isotopes in order of priority, and
one does not; the prioritized lists rank isotopes according to
different criteria. For example, the National Institutes of Health
prioritized isotopes on the basis of their importance to medical
research, while the National Isotope Development Center prioritized
isotopes on the basis of their importance to research and commercial
applications. In total, 104 different isotopes appear on the five
lists--about 18 percent of the total number of isotopes currently
available from the program. Although a few isotopes are found on more
than one list, most isotopes are found on only a single list.
The Isotope Program mitigates risks by using the flexibility of its
revolving fund to help manage unexpected events, such as losses in
revenues. The Isotope Program is authorized to carry over revenues and
yearly appropriations in its revolving fund from fiscal year to fiscal
year. The law authorizing the revolving fund provides the program
broad discretion for managing the fund, stating that appropriations
and revenues deposited into the fund are to be used for "activities
related to the production, distribution, and sale of isotopes and
related services."[Footnote 19] The program uses its flexibility in
managing the revolving fund to prepare for and mitigate unexpected
events. To this end, of the 10 percent fee the program adds to the
price of isotopes sold to commercial customers, it deposits 4 percent
into the revolving fund to cover unanticipated events. For example,
the program drew on the fund to maintain operations in 2011 and 2012
in the face of a significant, unexpected decline in revenue from the
sale of strontium-82.
The Isotope Program also assesses risks at its three primary isotope
production facilities by identifying and managing risks to the
production sites. The isotope production facilities at Oak Ridge and
Los Alamos National Laboratories in 2011 developed plans that describe
processes for identifying and managing risks at the sites that could
be detrimental to isotope production.[Footnote 20] The plans lay out
which production site elements--such as infrastructure, chemical
processing, and shipping processes--should be assessed for risks and
describe how site officials are to determine the likelihood and
consequence of any identified risks. In conjunction with the plans,
Oak Ridge and Los Alamos National Laboratories created spreadsheets
for tracking risks--called risk registers--that list each identified
risk, its likelihood, consequence, and mitigation strategy, among
other things. Many of the identified risks focus on equipment failure
or malfunction, such as risks that components of a processing facility
shut down unexpectedly. Other risks are related to management and
regulatory issues. Brookhaven National Laboratory has developed a
similar risk-tracking spreadsheet that focuses exclusively on risks to
production equipment. According to one program official, the risk
management plans and spreadsheets help the program set priorities for
investments that will help manage risks. For example, on the basis of
Los Alamos National Laboratory's risk register, the program decided to
modify its facilities to reduce radiation risks. These risk management
plans and risk registers are specific to the three production sites
and do not identify risks to the entire Isotope Program.
DOE's Isotope Program Does Not Have Clear Objectives That Enable It to
Comprehensively Assess Program Risks:
The Isotope Program is taking risk assessment actions without first
establishing clear, consistent objectives; that is, it does not
identify and mitigate risks to achieving program objectives in a
comprehensive way. One of the federal standards for internal control--
risk assessment--states that a precondition to risk assessment is the
establishment of clear, consistent objectives. Long-term goals and
objectives describe how the program will implement its mission, when
actions will be taken, and what resources are needed to reach these
goals. Once objectives have been set, the program then identifies
risks that could keep it from efficiently and effectively achieving
those objectives at all levels. After risks have been identified, they
are to be analyzed for their possible effect and decisions made on how
to manage the identified risks.[Footnote 21]
DOE's Isotope Program has not established clear, consistent objectives
to serve as a basis for risk assessment. Isotope Program officials
told us the program is relying on two reports from the Nuclear Science
Advisory Committee's isotope subcommittee to guide its decisions and
that these two reports provide adequate guidance. Together, these
reports recommend 15 different long-term actions for the program but
do not provide clear objectives for the program or a description of
how those objectives are to be achieved. For example, one report
recommends that the program construct and operate an electromagnetic
isotope separator facility for stable and long-lived radioisotopes but
does not describe how this recommendation is to be achieved. The
report also does not provide criteria for measuring progress toward
meeting this or other recommendations. Isotope Program officials told
us, however, that the program is undertaking a new strategic planning
process in 2012 to develop a 5-year strategic plan.
Without clearly defined objectives that lay out what the program is to
accomplish, the Isotope Program cannot be assured that its current
risk assessment and mitigation efforts focus on the most significant
issues that could impede achievement of its mission. For example, the
program does not have objectives that could provide direction about
which of the five high-priority isotope lists warrants the most
attention. Instead, program officials reported that they take all the
lists into account when making production and research decisions. They
could not tell us if one list of isotopes is a higher priority than
the others. Furthermore, without clear objectives, program officials
cannot determine how important one isotope on a list is relative to
isotopes on the other lists because they are prioritized using
different criteria, or they are not prioritized. For example,
* thallium-203 is ranked as the most important isotope on the National
Isotope Development Center's list of stable isotopes;
* actinium-225, astatine-211, and lead-212 are identified as the most
important isotopes in medicine, pharmaceuticals, and biology in the
report of the Nuclear Science Advisory Committee's isotope
subcommittee; and:
* californium-252 and radium-225 are identified as the most important
isotopes for physical science and engineering in this same report.
Without consolidating the multiple lists of high-priority isotopes,
however, it is unclear which isotopes have greater priority than
others. Thus, program managers may not be focusing limited resources
on the most important isotopes.
Furthermore, because the program does not have clear objectives, it
cannot be assured that it is assessing and mitigating risks from all
relevant external and internal sources. In particular, the program has
not assessed risks associated with relying on a small handful of
isotopes for a large percentage of annual revenue. This issue is
important in the context of the unexpected decline in strontium-82
orders that occurred in 2011, which resulted in a large reduction in
expected revenue. The program likely could not have anticipated this
loss, but comprehensive risk assessment efforts might have identified
the risk of relying on strontium-82 and a few other isotopes for a
large amount of revenue. Without identifying all relevant risks, the
program also cannot determine how to manage such risks. When the
strontium-82 orders declined, the program was able to rely on its
revolving fund to make up for unexpected revenue loss, but it may not
always be able to do so. Isotope Program officials told us there is no
guiding document for how the revolving fund should be spent or
managed. Without guidance on how to manage the revolving fund in a way
that helps mitigate risk, the program cannot be assured that it will
be able to continue using the fund to both advance program missions
and mitigate risks. For example, if the program unexpectedly loses
revenue for several years in a row, the revolving fund may not provide
sufficient reserves to maintain program operations.
Conclusions:
Managing the production and sale of over 300 different isotopes for
various research, commercial, industrial, and medical applications is
a daunting task. With a wide variety of customers, whose needs may
change over time, it is difficult for the Isotope Program to determine
demand, plan production, and project revenue streams to avoid
shortages of important isotopes or interruptions in the revenues that
help to sustain the program. The Isotope Program is taking several
actions to assess demand and plan production. In addition, the Isotope
Program has clearly defined under what circumstances it will charge
reduced prices for research isotopes. The program has not, however,
defined what factors it will consider when it sets prices for isotopes
sold commercially, including defining under what circumstances it will
set prices for such isotopes at or above full cost recovery. Without
transparency in decisions on pricing, it is unclear if Isotope Program
officials are setting prices consistently. Moreover, in the absence of
established market prices and without current information on the value
customers place on isotopes and prices of similar products, the
Isotope Program cannot ensure that the prices it sets are appropriate
and thus may be forgoing revenues that could be used to further its
mission and ensure the program's long-term viability.
As the Isotope Program moves forward with its process to establish a 5-
year strategic plan, creating clear goals and objectives is the first
step in being able to identify and manage risks to achieving the
program's mission. Identifying high-priority isotopes that may need
additional oversight is a good step toward managing risks, but without
consolidating those lists and prioritizing them, program managers may
not direct limited resources toward the most important isotopes.
Finally, when the Isotope Program's revenues from strontium-82
unexpectedly stopped, program officials were fortunate to have the
revolving fund to mitigate the unexpected loss in revenue and maintain
operations without disrupting supplies of other isotopes. Without
clear guidance on when and how to use the revolving fund to mitigate
future unexpected losses in revenue, the program cannot ensure that it
will have sufficient funds to maintain operations, or for other
activities, such as funding research and other projects that help the
Isotope Program achieve its mission.
Recommendations for Executive Action:
We are making four recommendations to the Secretary of Energy designed
to improve the Isotope Program's transparency in setting prices and
efficiency in managing isotopes. Specifically, we recommend that the
Secretary of Energy direct the Isotope Program to take the following
four actions:
* Clearly define the factors to be considered when the program sets
prices for isotopes sold commercially, including defining under what
circumstances it will set prices at or above full cost recovery. This
should include assessing, when appropriate, current information on the
value of isotopes to customers and the prices of similar products.
* In conjunction with strategic planning efforts already under way,
create clear goals and objectives to serve as a basis for risk
assessment, identify risks to achieving its goals and objectives, and
determine what actions to take to manage the risks.
* Consolidate the lists of high-priority isotopes so the program can
ensure that its resources are focused on the most important isotopes.
* Establish clear guidance for managing the revolving fund to ensure
that the fund is sufficient to use as a contingency for unexpected
losses in revenue.
Agency Comments and Our Evaluation:
We provided a draft of this report to DOE for review and comment. In
its written response, reproduced in appendix II, DOE explained that
our recommendations will generally be addressed through the Isotope
Program's current efforts to update its pricing policy and develop a
strategic plan. DOE took exception, however, to our characterization
of how the Isotope Program sets prices for commercial isotopes.
Specifically, according to DOE's letter, the Isotope Program does
consider "value of isotopes to customers" when setting prices for
commercial isotopes. Nevertheless, none of the documents provided by
the Isotope Program during our review show that the program conducted
a current, formal analysis of what customers are willing to pay for
commercial isotopes. Our report points out that program officials gain
a sense of the value customers place on commercial isotopes through
informal interactions with the customers themselves. Such
interactions, in our view, do not provide a rigorous approach to
determining a customer's value for commercial isotopes as customers
generally strive to obtain needed materials, including isotopes, at
the lowest possible cost. We are encouraged to see that, according to
DOE's comments, the Isotope Program's updated pricing policy is to
identify which factors are to be considered in setting prices,
including formal analysis of the value of commercial isotopes to
customers.
In its comments, DOE expressed concern that our report suggests
maximizing revenue and pricing commercial isotopes to increase
revenue. DOE explained that the Isotope Program generally sets prices
to fulfill the mandate established by the Atomic Energy Act of 1954 to
provide isotopes at prices that do not discourage their use. Our
report does not emphasize maximizing revenue or setting prices solely
to increase revenue. It does point out that the Isotope Program has
not performed the formal market analyses required by its own pricing
policy. DOE further stated that the Isotope Program considers several
factors when determining prices for commercial isotopes, including a
"bottom-up activity-based costing for isotope production," and it has
initiated two market studies that will provide input into the
assessment of market prices. Comprehensive market studies would
determine the prices customers are willing to pay for isotopes and
prices of alternatives, among other factors, and would thus determine
if the Isotope Program's prices for commercial isotopes are set at the
appropriate level. Such analyses would also show whether the full-cost-
recovery price, which is used for all but three of the commercially
sold isotopes, is resulting in unintended, but avoidable,
consequences. General economic considerations suggest that setting
prices of isotopes at artificially low levels could have unintended
consequences such as discouraging other entities from producing
isotopes, discouraging commercial entities and researchers from
developing alternatives, and encouraging overconsumption. Furthermore,
our report points out that the Atomic Energy Act of 1954 states that
isotope prices should not discourage commercial isotope producers from
entering the market.
With regard to our recommendations, DOE's letter indicates that three
of our four recommendations are being addressed through the Isotope
Program's present efforts to update its pricing policy and develop a
comprehensive strategic plan and risk assessment. With regard to our
fourth recommendation--to consolidate and prioritize isotopes from the
lists of high-priority isotopes--DOE stated that it "will need to
assess the value added of doing an overall prioritization." DOE
further states that even though an isotope may be a high priority for
the isotope community, there is no guarantee that an entity is capable
of producing it. In our view, this situation highlights the need for
our recommendation. The Isotope Program has done outreach with the
isotope community to identify the most important isotopes and has
created a peer-review process that considers isotopes on the various
high-priority lists as one of its factors in selecting projects for
funding. This process alone, however, cannot ensure that the program's
resources are accurately focused on the most-needed isotopes.
Therefore, we believe it is up to the Isotope Program to consolidate
the lists of high-priority isotopes and develop criteria to determine
on which isotopes resources are to be focused.
Finally, DOE's letter stated that we mischaracterized NNSA's mission,
which does not include providing isotopes to stakeholders. We
clarified this statement and have made changes throughout the report
as needed. DOE also provided technical comments that we incorporated
in the report as appropriate.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to the
appropriate congressional committees, Secretary of Energy, and other
interested parties. In addition, the report will be available at no
charge on the GAO website at [hyperlink, http://www.gao.gov].
If you or your staff members have any questions about this report,
please contact me at (202) 512-3841 or aloisee@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. GAO staff who made key
contributions to this report are listed in appendix III.
Signed by:
Gene Aloise:
Director Natural Resources and Environment:
[End of section]
Appendix I: Isotopes Available from DOE's Isotope Program:
This table identifies the isotopes provided at the time of this report
for sale by the Department of Energy's (DOE) Isotope Development and
Production for Research and Applications program (Isotope Program).
According to Isotope Program officials, the availability of these
isotopes may change and some isotopes may be provided in different
chemical forms. For example, bromine-79 is available as sodium bromide
but also as potassium bromide, silver bromide, and ammonium bromide.
The table also shows how the Isotope Program classifies each isotope--
as a radioisotope or stable isotope--and if an isotope is provided by
the National Nuclear Security Administration (NNSA) and sold by the
Isotope Program.
Isotope: Actinium-225;
Radioisotope: [Check].
Isotope: Americium-243;
Radioisotope: [Check];
Provided by NNSA: [Check].
Isotope: Antimony-121;
Stable isotope: [Check].
Isotope: Antimony-123;
Stable isotope: [Check].
Isotope: Argon-36;
Stable isotope: [Check].
Isotope: Argon-40;
Stable isotope: [Check].
Isotope: Arsenic-72;
Radioisotope: [Check].
Isotope: Arsenic-73;
Radioisotope: [Check].
Isotope: Barium-130;
Stable isotope: [Check].
Isotope: Barium-132;
Stable isotope: [Check].
Isotope: Barium-134;
Stable isotope: [Check].
Isotope: Barium-135;
Stable isotope: [Check].
Isotope: Barium-136;
Stable isotope: [Check].
Isotope: Barium-137;
Stable isotope: [Check].
Isotope: Barium-138;
Stable isotope: [Check].
Isotope: Berkelium-249;
Radioisotope: [Check].
Isotope: Beryllium-7;
Radioisotope: [Check].
Isotope: Bismuth-207;
Radioisotope: [Check].
Isotope: Bromine-79;
Stable isotope: [Check].
Isotope: Bromine-81;
Stable isotope: [Check].
Isotope: Cadmium-106;
Stable isotope: [Check].
Isotope: Cadmium-108;
Stable isotope: [Check].
Isotope: Cadmium-109;
Radioisotope: [Check].
Isotope: Cadmium-110;
Stable isotope: [Check].
Isotope: Cadmium-111;
Stable isotope: [Check].
Isotope: Cadmium-112;
Stable isotope: [Check].
Isotope: Cadmium-113;
Stable isotope: [Check].
Isotope: Cadmium-114;
Stable isotope: [Check].
Isotope: Cadmium-116;
Stable isotope: [Check].
Isotope: Calcium-40;
Stable isotope: [Check].
Isotope: Calcium-42;
Stable isotope: [Check].
Isotope: Calcium-43;
Stable isotope: [Check].
Isotope: Calcium-44;
Stable isotope: [Check].
Isotope: Calcium-46;
Stable isotope: [Check].
Isotope: Calcium-48;
Stable isotope: [Check].
Isotope: Californium-249;
Radioisotope: [Check].
Isotope: Californium-252;
Radioisotope: [Check].
Isotope: Carbon-12;
Stable isotope: [Check].
Isotope: Cerium-136;
Stable isotope: [Check].
Isotope: Cerium-138;
Stable isotope: [Check].
Isotope: Cerium-140;
Stable isotope: [Check].
Isotope: Cerium-142;
Stable isotope: [Check].
Isotope: Chlorine-35;
Stable isotope: [Check].
Isotope: Chlorine-37;
Stable isotope: [Check].
Isotope: Chromium-50;
Stable isotope: [Check].
Isotope: Chromium-52;
Stable isotope: [Check].
Isotope: Chromium-53;
Stable isotope: [Check].
Isotope: Chromium-54;
Stable isotope: [Check].
Isotope: Cobalt-60;
Radioisotope: [Check].
Isotope: Copper-63;
Stable isotope: [Check].
Isotope: Copper-65;
Stable isotope: [Check].
Isotope: Copper-67;
Radioisotope: [Check].
Isotope: Curium-244;
Radioisotope: [Check];
Provided by NNSA: [Check].
Isotope: Curium-248;
Radioisotope: [Check];
Provided by NNSA: [Check].
Isotope: Dysprosium-156;
Stable isotope: [Check].
Isotope: Dysprosium-158;
Stable isotope: [Check].
Isotope: Dysprosium-160;
Stable isotope: [Check].
Isotope: Dysprosium-161;
Stable isotope: [Check].
Isotope: Dysprosium-162;
Stable isotope: [Check].
Isotope: Dysprosium-163;
Stable isotope: [Check].
Isotope: Dysprosium-164;
Stable isotope: [Check].
Isotope: Dysprosium-166;
Radioisotope: [Check].
Isotope: Erbium-162;
Stable isotope: [Check].
Isotope: Erbium-164;
Stable isotope: [Check].
Isotope: Erbium-166;
Stable isotope: [Check].
Isotope: Erbium-167;
Stable isotope: [Check].
Isotope: Erbium-168;
Stable isotope: [Check].
Isotope: Erbium-170;
Stable isotope: [Check].
Isotope: Europium-151;
Stable isotope: [Check].
Isotope: Europium-153;
Stable isotope: [Check].
Isotope: Gadolinium-148;
Radioisotope: [Check].
Isotope: Gadolinium-152;
Stable isotope: [Check].
Isotope: Gadolinium-154;
Stable isotope: [Check].
Isotope: Gadolinium-155;
Stable isotope: [Check].
Isotope: Gadolinium-156;
Stable isotope: [Check].
Isotope: Gadolinium-157;
Stable isotope: [Check].
Isotope: Gadolinium-158;
Stable isotope: [Check].
Isotope: Gadolinium-160;
Stable isotope: [Check].
Isotope: Gallium-69;
Stable isotope: [Check].
Isotope: Gallium-71;
Stable isotope: [Check].
Isotope: Germanium-68;
Radioisotope: [Check].
Isotope: Germanium-70;
Stable isotope: [Check].
Isotope: Germanium-72;
Stable isotope: [Check].
Isotope: Germanium-73;
Stable isotope: [Check].
Isotope: Germanium-74;
Stable isotope: [Check].
Isotope: Germanium-76;
Stable isotope: [Check].
Isotope: Gold-199;
Radioisotope: [Check].
Isotope: Hafnium-174;
Stable isotope: [Check].
Isotope: Hafnium-176;
Stable isotope: [Check].
Isotope: Hafnium-177;
Stable isotope: [Check].
Isotope: Hafnium-178;
Stable isotope: [Check].
Isotope: Hafnium-179;
Stable isotope: [Check].
Isotope: Hafnium-180;
Stable isotope: [Check].
Isotope: Helium-3;
Stable isotope: [Check];
Provided by NNSA: [Check].
Isotope: Holmium-166;
Radioisotope: [Check].
Isotope: Indium-113;
Stable isotope: [Check].
Isotope: Indium-115;
Stable isotope: [Check].
Isotope: Iridium-191;
Stable isotope: [Check].
Isotope: Iridium-192;
Radioisotope: [Check].
Isotope: Iridium-193;
Stable isotope: [Check].
Isotope: Iron-52;
Radioisotope: [Check].
Isotope: Iron-54;
Stable isotope: [Check].
Isotope: Iron-55;
Radioisotope: [Check].
Isotope: Iron-56;
Stable isotope: [Check].
Isotope: Iron-57;
Stable isotope: [Check].
Isotope: Iron-58;
Stable isotope: [Check].
Isotope: Krypton-78;
Stable isotope: [Check].
Isotope: Krypton-80;
Stable isotope: [Check].
Isotope: Krypton-82;
Stable isotope: [Check].
Isotope: Krypton-84;
Stable isotope: [Check].
Isotope: Krypton-86;
Stable isotope: [Check].
Isotope: Lanthanum-138;
Stable isotope: [Check].
Isotope: Lanthanum-139;
Stable isotope: [Check].
Isotope: Lead-204;
Stable isotope: [Check].
Isotope: Lead-206;
Stable isotope: [Check].
Isotope: Lead-207;
Stable isotope: [Check].
Isotope: Lead-208;
Stable isotope: [Check].
Isotope: Lithium-6;
Stable isotope: [Check];
Provided by NNSA: [Check].
Isotope: Lithium-7;
Stable isotope: [Check];
Provided by NNSA: [Check].
Isotope: Lutetium-175;
Stable isotope: [Check].
Isotope: Lutetium-176;
Stable isotope: [Check].
Isotope: Lutetium-177;
Radioisotope: [Check].
Isotope: Magnesium-24;
Stable isotope: [Check].
Isotope: Magnesium-25;
Stable isotope: [Check].
Isotope: Magnesium-26;
Stable isotope: [Check].
Isotope: Magnesium-28;
Radioisotope: [Check].
Isotope: Mercury-196;
Stable isotope: [Check].
Isotope: Mercury-198;
Stable isotope: [Check].
Isotope: Mercury-199;
Stable isotope: [Check].
Isotope: Mercury-200;
Stable isotope: [Check].
Isotope: Mercury-201;
Stable isotope: [Check].
Isotope: Mercury-202;
Stable isotope: [Check].
Isotope: Mercury-204;
Stable isotope: [Check].
Isotope: Molybdenum-92;
Stable isotope: [Check].
Isotope: Molybdenum-94;
Stable isotope: [Check].
Isotope: Molybdenum-95;
Stable isotope: [Check].
Isotope: Molybdenum-96;
Stable isotope: [Check].
Isotope: Molybdenum-97;
Stable isotope: [Check].
Isotope: Molybdenum-98;
Stable isotope: [Check].
Isotope: Molybdenum-100;
Stable isotope: [Check].
Isotope: Neodymium-142;
Stable isotope: [Check].
Isotope: Neodymium-143;
Stable isotope: [Check].
Isotope: Neodymium-144;
Stable isotope: [Check].
Isotope: Neodymium-145;
Stable isotope: [Check].
Isotope: Neodymium-146;
Stable isotope: [Check].
Isotope: Neodymium-148;
Stable isotope: [Check].
Isotope: Neodymium-150;
Stable isotope: [Check].
Isotope: Neon-22;
Stable isotope: [Check].
Isotope: Nickel-58;
Stable isotope: [Check].
Isotope: Nickel-60;
Stable isotope: [Check].
Isotope: Nickel-61;
Stable isotope: [Check].
Isotope: Nickel-62;
Stable isotope: [Check].
Isotope: Nickel-63;
Radioisotope: [Check].
Isotope: Nickel-64;
Stable isotope: [Check].
Isotope: Nitrogen-15;
Stable isotope: [Check].
Isotope: Osmium-184;
Stable isotope: [Check].
Isotope: Osmium-186;
Stable isotope: [Check].
Isotope: Osmium-187;
Stable isotope: [Check].
Isotope: Osmium-188;
Stable isotope: [Check].
Isotope: Osmium-189;
Stable isotope: [Check].
Isotope: Osmium-190;
Stable isotope: [Check].
Isotope: Osmium-192;
Stable isotope: [Check].
Isotope: Oxygen-16;
Stable isotope: [Check].
Isotope: Palladium-102;
Stable isotope: [Check].
Isotope: Palladium-104;
Stable isotope: [Check].
Isotope: Palladium-105;
Stable isotope: [Check].
Isotope: Palladium-106;
Stable isotope: [Check].
Isotope: Palladium-108;
Stable isotope: [Check].
Isotope: Palladium-110;
Stable isotope: [Check].
Isotope: Platinum-190;
Stable isotope: [Check].
Isotope: Platinum-192;
Stable isotope: [Check].
Isotope: Platinum-194;
Stable isotope: [Check].
Isotope: Platinum-195;
Stable isotope: [Check].
Isotope: Platinum-196;
Stable isotope: [Check].
Isotope: Platinum-198;
Stable isotope: [Check].
Isotope: Plutonium-238;
Radioisotope: [Check];
Provided by NNSA: [Check].
Isotope: Plutonium-239;
Radioisotope: [Check].
Isotope: Plutonium-240;
Radioisotope: [Check].
Isotope: Plutonium-241;
Radioisotope: [Check].
Isotope: Plutonium-242;
Radioisotope: [Check];
Provided by NNSA: [Check].
Isotope: Polonium-209;
Radioisotope: [Check].
Isotope: Potassium-39;
Stable isotope: [Check].
Isotope: Potassium-40;
Stable isotope: [Check].
Isotope: Potassium-41;
Stable isotope: [Check].
Isotope: Radium-223;
Radioisotope: [Check].
Isotope: Radium-225;
Radioisotope: [Check].
Isotope: Rhenium-185;
Stable isotope: [Check].
Isotope: Rhenium-186;
Radioisotope: [Check].
Isotope: Rhenium-187;
Stable isotope: [Check].
Isotope: Rubidium-83;
Radioisotope: [Check].
Isotope: Rubidium-85;
Stable isotope: [Check].
Isotope: Rubidium-87;
Stable isotope: [Check].
Isotope: Ruthenium-96;
Stable isotope: [Check].
Isotope: Ruthenium-97;
Radioisotope: [Check].
Isotope: Ruthenium-98;
Stable isotope: [Check].
Isotope: Ruthenium-99;
Stable isotope: [Check].
Isotope: Ruthenium-100;
Stable isotope: [Check].
Isotope: Ruthenium-101;
Stable isotope: [Check].
Isotope: Ruthenium-102;
Stable isotope: [Check].
Isotope: Ruthenium-104;
Stable isotope: [Check].
Isotope: Samarium-144;
Stable isotope: [Check].
Isotope: Samarium-147;
Stable isotope: [Check].
Isotope: Samarium-148;
Stable isotope: [Check].
Isotope: Samarium-149;
Stable isotope: [Check].
Isotope: Samarium-150;
Stable isotope: [Check].
Isotope: Samarium-152;
Stable isotope: [Check].
Isotope: Samarium-153;
Radioisotope: [Check].
Isotope: Samarium-154;
Stable isotope: [Check].
Isotope: Selenium-72;
Radioisotope: [Check].
Isotope: Selenium-74;
Stable isotope: [Check].
Isotope: Selenium-75;
Radioisotope: [Check].
Isotope: Selenium-76;
Stable isotope: [Check].
Isotope: Selenium-77;
Stable isotope: [Check].
Isotope: Selenium-78;
Stable isotope: [Check].
Isotope: Selenium-80;
Stable isotope: [Check].
Isotope: Selenium-82;
Stable isotope: [Check].
Isotope: Silicon-28;
Stable isotope: [Check].
Isotope: Silicon-29;
Stable isotope: [Check].
Isotope: Silicon-30;
Stable isotope: [Check].
Isotope: Silicon-32;
Radioisotope: [Check].
Isotope: Silver-107;
Stable isotope: [Check].
Isotope: Silver-109;
Stable isotope: [Check].
Isotope: Sodium-22;
Radioisotope: [Check].
Isotope: Strontium-82;
Radioisotope: [Check].
Isotope: Strontium-84;
Stable isotope: [Check].
Isotope: Strontium-85;
Radioisotope: [Check].
Isotope: Strontium-86;
Stable isotope: [Check].
Isotope: Strontium-87;
Stable isotope: [Check].
Isotope: Strontium-88;
Stable isotope: [Check].
Isotope: Strontium-90;
Radioisotope: [Check].
Isotope: Sulfur-32;
Stable isotope: [Check].
Isotope: Sulfur-33;
Stable isotope: [Check].
Isotope: Sulfur-34;
Stable isotope: [Check].
Isotope: Sulfur-36;
Stable isotope: [Check].
Isotope: Tantalum-180;
Stable isotope: [Check].
Isotope: Tantalum-181;
Stable isotope: [Check].
Isotope: Technetium-95;
Radioisotope: [Check].
Isotope: Technetium-96;
Radioisotope: [Check].
Isotope: Technetium-99;
Radioisotope: [Check].
Isotope: Tellurium-120;
Stable isotope: [Check].
Isotope: Tellurium-122;
Stable isotope: [Check].
Isotope: Tellurium-123;
Stable isotope: [Check].
Isotope: Tellurium-123[A];
Radioisotope: [Check].
Isotope: Tellurium-124;
Stable isotope: [Check].
Isotope: Tellurium-125;
Stable isotope: [Check].
Isotope: Tellurium-126;
Stable isotope: [Check].
Isotope: Tellurium-128;
Stable isotope: [Check].
Isotope: Tellurium-130;
Stable isotope: [Check].
Isotope: Thallium-203;
Stable isotope: [Check].
Isotope: Thallium-205;
Stable isotope: [Check].
Isotope: Thorium-227;
Radioisotope: [Check].
Isotope: Thorium-228;
Radioisotope: [Check].
Isotope: Tin-112;
Stable isotope: [Check].
Isotope: Tin-114;
Stable isotope: [Check].
Isotope: Tin-115;
Stable isotope: [Check].
Isotope: Tin-116;
Stable isotope: [Check].
Isotope: Tin-117;
Stable isotope: [Check].
Isotope: Tin-117a;
Radioisotope: [Check].
Isotope: Tin-118;
Stable isotope: [Check].
Isotope: Tin-119;
Stable isotope: [Check].
Isotope: Tin-120;
Stable isotope: [Check].
Isotope: Tin-122;
Stable isotope: [Check].
Isotope: Tin-124;
Stable isotope: [Check].
Isotope: Titanium-44;
Radioisotope: [Check].
Isotope: Titanium-46;
Stable isotope: [Check].
Isotope: Titanium-47;
Stable isotope: [Check].
Isotope: Titanium-48;
Stable isotope: [Check].
Isotope: Titanium-49;
Stable isotope: [Check].
Isotope: Titanium-50;
Stable isotope: [Check].
Isotope: Tungsten-180;
Stable isotope: [Check].
Isotope: Tungsten-182;
Stable isotope: [Check].
Isotope: Tungsten-183;
Stable isotope: [Check].
Isotope: Tungsten-184;
Stable isotope: [Check].
Isotope: Tungsten-186;
Stable isotope: [Check].
Isotope: Tungsten-188;
Radioisotope: [Check].
Isotope: Uranium-234;
Radioisotope: [Check].
Isotope: Uranium-235;
Radioisotope: [Check];
Provided by NNSA: [Check].
Isotope: Uranium-238;
Radioisotope: [Check];
Provided by NNSA: [Check].
Isotope: Vanadium-48;
Radioisotope: [Check].
Isotope: Vanadium-49;
Radioisotope: [Check].
Isotope: Vanadium-50;
Stable isotope: [Check].
Isotope: Xenon-124;
Stable isotope: [Check].
Isotope: Xenon-126;
Stable isotope: [Check].
Isotope: Xenon-127;
Radioisotope: [Check].
Isotope: Xenon-129;
Stable isotope: [Check].
Isotope: Xenon-131;
Stable isotope: [Check].
Isotope: Xenon-134;
Stable isotope: [Check].
Isotope: Xenon-136;
Stable isotope: [Check].
Isotope: Ytterbium-168;
Stable isotope: [Check].
Isotope: Ytterbium-170;
Stable isotope: [Check].
Isotope: Ytterbium-171;
Stable isotope: [Check].
Isotope: Ytterbium-172;
Stable isotope: [Check].
Isotope: Ytterbium-173;
Stable isotope: [Check].
Isotope: Ytterbium-174;
Stable isotope: [Check].
Isotope: Ytterbium-176;
Stable isotope: [Check].
Isotope: Yttrium-88;
Radioisotope: [Check].
Isotope: Zinc-64;
Stable isotope: [Check].
Isotope: Zinc-65;
Radioisotope: [Check].
Isotope: Zinc-66;
Stable isotope: [Check].
Isotope: Zinc-67;
Stable isotope: [Check].
Isotope: Zinc-68;
Stable isotope: [Check].
Isotope: Zinc-70;
Stable isotope: [Check].
Isotope: Zirconium-88;
Radioisotope: [Check].
Isotope: Zirconium-90;
Stable isotope: [Check].
Isotope: Zirconium-91;
Stable isotope: [Check].
Isotope: Zirconium-92;
Stable isotope: [Check].
Isotope: Zirconium-94;
Stable isotope: [Check].
Isotope: Zirconium-96;
Stable isotope: [Check].
Source: DOE.
[A] Tellurium-123 and tin-117 each has two forms offered by the
Isotope Program, one that is stable and a second that emits radiation
when it decays to the stable state.
[End of table]
[End of section]
Appendix II: Comments from the Department of Energy:
Department of Energy:
Office of Science:
Office of the Director:
Washington, DC 20585:
May 14, 2012:
Mr. Gene Aloise:
Director, Natural Resources and Environment:
Government Accountability Office:
441 G Street:
Washington, DC 20548:
Dear Mr. Aloise:
Thank you for the opportunity to comment on the draft Government
Accountability Office (GAO) report entitled, "Managing Critical
Isotopes: DOE's Isotope Program Needs Better Planning for Setting
Prices and Managing Production Risks" (GAO-12-591). We have reviewed
the draft report and provide general comments below as well as
substantive and technical/editorial comments as an attachment. The
comments provided here have been coordinated with other relevant
offices of the Department of Energy (DOE).
The GAO was charged by the Energy and Environment and the
Investigations and Oversight Subcommittees of the House Committee on
Science, Space, and Technology "to determine (1) which isotopes are
produced, sold or distributed either by the Isotope Program or NNSA
[National Nuclear Security Administration] and how the two agencies
make isotopes available for commercial and research applications; (2)
what steps the Isotope Program takes to provide isotopes for
commercial and research applications; and (3) the extent to which DOE
is assessing and mitigating risks facing the Isotope Program." We
recognize that conducting a review of the Department's isotope
activities is an enormous undertaking, and in particular, we
appreciate the time and thoroughness the GAO took to review the
Department's program.
The Isotope Program was transferred from the Office of Nuclear Energy
to the Office of Nuclear Physics within the Office of Science late in
FY 2009. Over the past couple of years, the Office of Nuclear Physics
has taken several actions and made significant changes in the Isotope
Program, and they should be recognized for their extensive efforts
over such a short period of time. These efforts include implementing a
new federal management structure, creating the National Isotope
Development Center to improve relations with stakeholders, conducting
strategic planning with federal advisory committees and stakeholders
to develop priorities, organizing workshops with federal agencies to
better understand demand, establishing a research and development
program to create new and improved isotope production techniques,
updating costing and pricing procedures to lower costs and update
prices, and incorporating new production sites into the program to
increase isotope availability. While a great deal of progress has been
made, we acknowledge that our plans to improve the effectiveness of
the Isotope Program are not yet complete. Most notably, the Isotope
Program is now in the process of developing a federal strategic plan
that incorporates input from a number of the strategic exercises that
we have been conducting over the past couple of years.
There are several statements in the report that the Department does
not find to be accurate characterizations of the Isotope Program.
First, contrary to the Isotope Program, NNSA does not have the mission
to supply isotopes to stakeholders. NNSA is a source of isotopes to
the Isotope Program should they be available for distribution out of
their material stockpiles, not a supplier of isotopes directly to
consumers. Second, the report states that the Isotope Program has not
fully assessed the pricing of most of these isotopes. The Isotope
Program expends considerable effort in establishing prices, including
full bottom-up activity-based costing for isotope production,
interactions with the isotope user community, and negotiations with
isotope customers. Likewise, the "value of isotopes to customers" has
always been considered in pricing development.
A concerning theme throughout the report, and related to the first
recommendation, is the maximization of revenue and the suggestion that
greater emphasis should be placed on setting prices to increase
revenue generated by the program. The Isotope Program is a complex
program that provides isotopes for both commercial customers and for
research purposes, requiring different approaches to setting prices.
The Isotope Program generally sets prices to fulfill the mandate
established by the Atomic Energy Act of 1954 to provide isotopes at
prices that do not discourage their use. For commercial customers,
prices are set in accordance with market prices when such prices
exceed production costs. To help inform its price setting practices,
the Isotope Program has initiated two marketing studies that will
provide input into the assessment of market prices, supplementing the
market evaluations that are inherent in annually setting isotope
prices and negotiating contracts.
The Department has the following general comments regarding each of
the recommendations.
Recommendation 1: "Clearly define the factors to be considered when it
sets prices for isotopes sold commercially, including defining under
what circumstances it will set prices at or above full cost recovery.
This should include assessing when appropriate, current information on
the value of the isotope to the customer and the price of similar
products."
The factors considered when the Isotope Program sets prices are
articulated in the 1990 Pricing Policy Memo, which was shared with the
GAO at the beginning of the audit. The updated 2012 Pricing Policy,
which is currently being finalized by the Department and of which a
draft was shared with the GAO, also identifies the factors considered
by the Isotope Program when establishing prices. These factors do
include the value of the isotope to the customer.
Recommendation 2 "In conjunction with strategic planning efforts
already underway, the Isotope Program should create clear goals and
objectives to serve as a basis for a risk assessment, identify risks
to achieving its goals and objectives, and determine what actions to
take to manage risks."
While the Department believes that the Isotope Program has established
clear goals and objectives, the federal strategic plan currently under
development will provide better clarity of these goals and objectives
and the Program intends to develop a programmatic risk management
document.
Recommendation 3 "Consolidate and prioritize the lists of high-
priority isotopes so that the program can better focus its resources
on the highest priorities."
These lists of isotopes developed through separate processes represent
very different categories of isotopes, with very different paths for
production or availability. As such, they may not directly compete for
resources. While a consolidated list is possible (although categories
will still be needed), the Department will need to assess the value
added of doing an overall prioritization as there are many paths of
isotopes that can be considered in parallel. In addition, while these
lists or categories of isotopes provide overall guidance in terms of
priority for the Isotope Program, decisions regarding investments are
also largely driven by merit-based peer review. The report does not
adequately address or recognize the role and importance that peer
review mechanisms have on making funding decisions. Just because an
isotope is high priority for the community does not guarantee that
there is an entity that has developed a compelling and credible
approach to producing it.
Recommendation 4 "Establish clear guidance for managing the Isotope
Program's revolving fund."
This is a sound recommendation, but one that can only be addressed
after the completion of the federal strategic plan, which is underway.
Thank you, again, for the opportunity to provide comment on this
draft. We look forward to receiving your final report. If you have any
questions related to this letter, please feel free to contact Dr.
Jehanne Gillo at (301) 903-1455.
Sincerely,
Signed by:
W. F. Brinkman:
Director, Office of Science:
Attachment:
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Gene Aloise, (202) 512-3841 or aloisee@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Ned H. Woodward, Assistant
Director; Wyatt R. Hundrup; Katherine Killebrew; and Michael Krafve
made key contributions to this report. Eric Bachhuber, Ellen W. Chu,
R. Scott Fletcher, Cindy Gilbert, Jonathan Kucskar, Mehrzad Nadji, and
Timothy M. Persons also made important contributions.
[End of section]
Footnotes:
[1] Isotopes are varieties of a given chemical element with the same
number of protons but different numbers of neutrons. For example, the
helium-3 isotope has one less neutron than the helium-4 isotope, which
is the helium isotope commonly used in party balloons.
[2] Congress created NNSA as a semiautonomous agency within DOE under
Title 32 of the National Defense Authorization Act for Fiscal Year
2000 (Pub. L. No. 106-65, § 3211 (1999)). NNSA is responsible for the
management and security of the nation's nuclear weapons,
nonproliferation, and naval reactors programs.
[3] GAO, Managing Critical Isotopes: Weaknesses in DOE's Management of
Helium-3 Delayed the Federal Response to a Critical Supply Shortage,
[hyperlink, http://www.gao.gov/products/GAO-11-472] (Washington, D.C.:
May 12, 2011).
[4] GAO, Neutron Detectors: Alternatives to Using Helium-3,
[hyperlink, http://www.gao.gov/products/GAO-11-753] (Washington, D.C.:
Sept. 29, 2011).
[5] In this report, we use the phrase "yearly appropriations" to refer
to funding that is received by DOE through the annual appropriations
process, but has no restrictions on the time by which it must be
obligated.
[6] The Nuclear Science Advisory Committee is an advisory committee
that provides official advice to the Department of Energy and the
National Science Foundation on basic nuclear science research. The
lead responsibility for the direction of the advisory committee,
selecting members, creating meeting agendas, and developing charges is
shared by the two agencies.
[7] A particle accelerator uses electromagnetic forces to accelerate
charged particles, such as electrons or protons. The resulting beam of
fast-moving particles may be used for a variety of applications,
including the creation of different isotopes.
[8] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] ("Green
Book") (Washington, D.C.: November 1999).
[9] Atomic Energy Act of 1954, Pub. L. No. 83-703, 68 Stat. 919.
[10] Radioisotopes are radioactive--that is, they are unstable forms
of elements that decay or disintegrate, emitting radiation. Some
radioisotopes are found naturally, and others can be produced in
nuclear reactors or particle accelerators. Stable isotopes do not
decay or emit radiation and are therefore not radioactive.
[11] The Isotope Program's revolving fund was first established under
Public Law 101-101, Title III. Both yearly appropriations and revenues
from the sales of isotopes are deposited into the revolving fund,
which the program then draws from to fund its operations. Any funds
remaining in the revolving fund at the end of a fiscal year are
carried over to the next fiscal year.
[12] Some isotopes that are produced by DOE's Isotope Program are
extracted from other materials held in inventory. For example,
americium-241 is extracted from other materials.
[13] In addition to these categories, many radioisotopes that are not
produced or sold by DOE's Isotope Program are available from
commercial entities, which produce and sell isotopes on the open
market.
[14] The half-life of a radioactive isotope is the time required for
half the unstable atoms to disintegrate, or decay, and release their
radiation.
[15] A batch of isotopes is the amount produced by an entire
production cycle. Researchers may require a smaller quantity of an
isotope than what is produced in a batch.
[16] Office of Management and Budget, Circular A-25.
[17] According to program officials, at present the Isotope Program
has set the price above full cost recovery for helium-3 and two other
isotopes. These three isotopes are priced above full cost recovery
because, according to officials, market prices exist that are greater
than the full cost of production, and setting the prices lower would
distort their market prices.
[18] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[19] Energy and Water Development Appropriations Act, 1990 (Pub. L.
No. 101-101, 103 Stat. 641).
[20] The plans also describe a similar process for identifying and
managing opportunities. The third production site at Brookhaven
National Laboratory has not developed a similar risk and opportunity
assessment and management plan.
[21] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[End of section]
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